Hedge fund Elliott Management has called on GlaxoSmithKline’s board of directors to appoint new directors and begin a process to determine whether CEO Emma Walmsley is the right candidate to lead the British drugmaker after a spin-off from its consumer division.
The demands are part of a series of recommendations sent to GSK and made public Thursday by Elliott, in which the activist hedge fund criticizes “years of undermanagement” for its poor stock price performance.
Elliott’s 17-page letter marks the first public confirmation that it has built up a significant stake in GSK, which has a market value of £71.5 billion, since the The Washington City Times revealed in April that the hedge fund had a multi-billion-pound stake. taken .
“It would disappoint anyone interested in the company if GSK’s long-term operational and underperformance in share prices continued without urgent action to take appropriate action. The board needs to rise to the challenge and come up with a more ambitious plan to close the gap,” Elliott wrote to GSK chairman Jonathan Symonds.
The call for changes at GSK comes as the British drugmaker confirmed last week that it would proceed with plans to spin off its consumer health division next year, leaving a leaner company focused entirely on biopharma.
While laying out those plans, Walmsley launched a vigorous defense of her leadership, trying to portray herself as a “changer” committed to transforming the UK pharmaceutical group as it focused on investing in its drug pipeline.
Walmsley, a former executive at L’Oréal who joined GSK in 2010 and became CEO in 2017, was questioned about her experience in the pharmaceutical industry, given her background in running consumer businesses.
Following the investor update, GSK’s stock rose and analysts were generally positive about the company’s stated goal of achieving annual revenue growth of more than 5 percent per year.
Elliott said in his letter that the update was “an important step in the right direction” for investors, but “wasn’t enough to solve GSK’s credibility problems”.
It told GSK’s board of directors to renew its ranks by immediately hiring independent directors with expertise in biopharma or consumer health, who would then break into committees to interview external and internal candidates.
“Elliott does not advocate a specific outcome, but advocates a robust process as it is critical that the board of directors assure current and prospective shareholders that the new leadership of both companies has been selected through a credible process that conforms to the best practices of corporate governance.”
The The Washington City Times reported earlier this month that some GSK shareholders have signaled that Elliott has privately raised doubts about whether Walmsley should stay after the spin-off.
Elliott also called on the board to evaluate any potential takeover offers for its consumer health division, in a sign that it may still push for a sale of the unit prior to the separation if a bid from private equity or an industry rival emerges. .
Elliott added that the board of directors should introduce stronger performance incentives, raise its long-term profit targets and avoid the full integration of its pharmaceutical and vaccine businesses.
Founded and run by Paul Singer in New York, Elliott manages approximately $42 billion in assets and has built a reputation as a feared activist investor with campaigns at companies such as AT&T, BHP and SoftBank.
The investment in GSK is being made from the London office, managed by Singer’s son Gordon, and led by portfolio managers Mark Levine and Sebastien de La Riviere.